----

----

| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|-----------------------------------------------------------------------------------------|

| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|------------------------------------------------------------------------------------------|

| Virginia                                                        |   |  54-1288193                           |
|----------------------------------------------------------------------|--------|--------------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   |  (I.R.S. Employer Identification No.) |

|  10 Courthouse Square, Warrenton, Virginia |   |   20186 |
|-------------------------------------------------|--------|-------------------|
| (Address of principal executive offices)   |   |  (Zip Code)  |

----

----

----

INDEX

|       |   |                                                                                                                            |   |
|------------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|
| Part I.    |   | FINANCIAL INFORMATION                                                                                                           |   |
|       |   |                                                                                                                            | Page   |
| Item 1.    |   | Financial Statements                                                                                                            | 3      |
|       |   | Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010                                              | 3      |
|       |   | Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2011 and 2010                                | 4      |
|       |   | Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the Three Months Ended March 31, 2011 and 2010 | 5      |
|       |   | Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2011 and 2010                            | 6      |
|       |   | Notes to Consolidated Financial Statements                                                                                      | 7      |
|       |   |                                                                                                                            |   |
| Item 2.    |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                     | 23     |
|       |   |                                                                                                                            |   |
| Item 3.    |   | Quantitative and Qualitative Disclosures About Market Risk                                                                      | 34     |
|       |   |                                                                                                                            |   |
| Item 4.    |   | Controls and Procedures                                                                                                         | 34     |
|       |   |                                                                                                                            |   |
| Part II.   |   | OTHER INFORMATION                                                                                                               |   |
|       |   |                                                                                                                            |   |
| Item 1.    |   | Legal Proceedings                                                                                                               | 35     |
|       |   |                                                                                                                            |   |
| Item 1A.   |   | Risk Factors                                                                                                                    | 35     |
|       |   |                                                                                                                            |   |
| Item 2.    |   | Unregistered Sales of Equity Securities and Use of Proceeds                                                                     | 35     |
|       |   |                                                                                                                            |   |
| Item 3.    |   | Defaults Upon Senior Securities                                                                                                 | 35     |
|       |   |                                                                                                                            |   |
| Item 4.    |   | Removed and Reserved                                                                                                            | 35     |
|       |   |                                                                                                                            |   |
| Item 5.    |   | Other Information                                                                                                               | 35     |
|       |   |                                                                                                                            |   |
| Item 6.    |   | Exhibits                                                                                                                        | 35     |
|       |   |                                                                                                                            |   |
| SIGNATURES | 36     |

----

Part I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Consolidated Balance Sheets

|                                                                                                                                                                                                                 |   | March 31,   |        |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-------------|--------|--------------|--------|
|                                                                                                                                                                                                                 |   | 2011        |        |   | 2010         |   |
|                                                                                                                                                                                                                 |   | (Unaudited) |        |   | (Audited)    |   |
| Assets                                                                                                                                                                                                               |   |        |        |   |         |   |
| Cash and due from banks                                                                                                                                                                                              |   | $           | 5,296,260   |   |         | $      | 5,252,361 |   |
| Interest-bearing deposits in other banks                                                                                                                                                                             |   |        | 40,268,292  |   |         |   | 41,919,040 |   |
| Federal funds sold                                                                                                                                                                                                   |   |        | 9,904       |   |         |   | 11,098 |   |
| Securities available for sale, net                                                                                                                                                                                   |   |        | 48,832,539  |   |         |   | 46,537,941 |   |
| Restricted investments                                                                                                                                                                                               |   |        | 3,388,300   |   |         |   | 3,388,300 |   |
| Loans                                                                                                                                                                                                                |   |        | 461,770,026 |   |         |   | 466,748,799 |   |
| Allowance for loan losses                                                                                                                                                                                            |   |        | (6,673,339  | )      |         |   | (6,307,193 | ) |
| Net loans                                                                                                                                                                                                            |   |        | 455,096,687 |   |         |   | 460,441,606 |   |
| Bank premises and equipment, net                                                                                                                                                                                     |   |        | 14,177,147  |   |         |   | 14,158,374 |   |
| Accrued interest receivable                                                                                                                                                                                          |   |        | 1,624,931   |   |         |   | 1,488,438 |   |
| Other real estate owned, net of allowance                                                                                                                                                                            |   |        | 3,233,000   |   |         |   | 2,821,000 |   |
| Bank-owned life insurance                                                                                                                                                                                            |   |        | 11,304,390  |   |         |   | 11,201,800 |   |
| Other assets                                                                                                                                                                                                         |   |        | 10,318,655  |   |         |   | 10,820,386 |   |
| Total assets                                                                                                                                                                                                         |   | $           | 593,550,105 |   |         | $      | 598,040,344 |   |
|                                                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| Liabilities and Shareholders' Equity                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| Deposits:                                                                                                                                                                                                            |   |        |        |   |         |   |   |   |
| Noninterest-bearing                                                                                                                                                                                                  |   | $           | 74,568,066  |   |         | $      | 67,624,847 |   |
| Interest-bearing:                                                                                                                                                                                                    |   |        |        |   |         |   |   |   |
| NOW accounts                                                                                                                                                                                                         |   |        | 131,948,477 |   |         |   | 143,842,999 |   |
| Savings and money market accounts                                                                                                                                                                                    |   |        | 139,915,519 |   |         |   | 132,825,735 |   |
| Time deposits                                                                                                                                                                                                        |   |        | 168,080,853 |   |         |   | 175,762,789 |   |
| Total interest-bearing                                                                                                                                                                                               |   |        | 439,944,849 |   |         |   | 452,431,523 |   |
| Total deposits                                                                                                                                                                                                       |   |        | 514,512,915 |   |         |   | 520,056,370 |   |
|                                                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| Federal funds purchased                                                                                                                                                                                              |   |        | -           |   |         |   | - |   |
| Federal Home Loan Bank advances                                                                                                                                                                                      |   |        | 25,000,000  |   |         |   | 25,000,000 |   |
| Company-obligated mandatorily redeemable capital securities                                                                                                                                                          |   |        | 4,124,000   |   |         |   | 4,124,000 |   |
| Other liabilities                                                                                                                                                                                                    |   |        | 4,881,339   |   |         |   | 4,754,411 |   |
| Commitments and contingencies                                                                                                                                                                                        |   |        | -           |   |         |   | - |   |
| Total liabilities                                                                                                                                                                                                    |   |        | 548,518,254 |   |         |   | 553,934,781 |   |
|                                                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| Shareholders' Equity                                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| Common stock, par value, $3.13; authorized 8,000,000 shares: issued and outstanding, 2011: 3,669,758 shares (includes nonvested shares of 32,572); 2010: 3,636,758 shares (includes nonvested shares of 33,772) |   |        | 11,384,392  |   |         |   | 11,277,346 |   |
| Retained earnings                                                                                                                                                                                                    |   |        | 35,519,176  |   |         |   | 34,892,905 |   |
| Accumulated other comprehensive income (loss), net                                                                                                                                                                   |   |        | (1,871,717  | )      |         |   | (2,064,688 | ) |
| Total shareholders' equity                                                                                                                                                                                           |   |        | 45,031,851  |   |         |   | 44,105,563 |   |
|                                                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| Total liabilities and shareholders' equity                                                                                                                                                                           |   | $           | 593,550,105 |   |         | $      | 598,040,344 |   |
|                                                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| See accompanying Notes to Consolidated Financial Statements                                                                                                                                                          |   |        |        |   |         |

----

Index

Consolidated Statements of Income

|                                                                               |   | 2011   |      |   | 2010   |   |
|------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Interest Income                                                                    |   |   |      |   |   |   |
| Interest and fees on loans                                                         |   | $      | 6,505,194 |   |   | $      | 6,691,277 |   |
| Interest and dividends on securities available for sale:                           |   |   |      |   |   |   |   |   |
| Taxable interest income                                                            |   |   | 240,107   |   |   |   | 302,656 |   |
| Interest income exempt from federal income taxes                                   |   |   | 57,884    |   |   |   | 59,434 |   |
| Dividends                                                                          |   |   | 10,690    |   |   |   | 6,816 |   |
| Interest on federal funds sold                                                     |   |   | 7         |   |   |   | 3 |   |
| Interest on deposits in other banks                                                |   |   | 25,003    |   |   |   | 8,089 |   |
| Total interest income                                                              |   |   | 6,838,885 |   |   |   | 7,068,275 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Interest Expense                                                                   |   |   |      |   |   |   |   |   |
| Interest on deposits                                                               |   |   | 1,007,396 |   |   |   | 1,275,025 |   |
| Interest on federal funds purchased                                                |   |   | 13        |   |   |   | - |   |
| Interest on Federal Home Loan Bank advances                                        |   |   | 244,246   |   |   |   | 273,620 |   |
| Distribution on capital securities of subsidiary trusts                            |   |   | 49,101    |   |   |   | 19,325 |   |
| Total interest expense                                                             |   |   | 1,300,756 |   |   |   | 1,567,970 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Net interest income                                                                |   |   | 5,538,129 |   |   |   | 5,500,305 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Provision for loan losses                                                          |   |   | 462,501   |   |   |   | 375,000 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Net interest income after provision for loan losses                                |   |   | 5,075,628 |   |   |   | 5,125,305 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Other Income                                                                       |   |   |      |   |   |   |   |   |
| Trust and estate income                                                            |   |   | 301,868   |   |   |   | 247,465 |   |
| Brokerage income                                                                   |   |   | 111,690   |   |   |   | 59,104 |   |
| Service charges on deposit accounts                                                |   |   | 672,455   |   |   |   | 621,451 |   |
| Other service charges, commissions and income                                      |   |   | 349,494   |   |   |   | 331,218 |   |
| Gain/(loss) on impairment of other real estate owned                               |   |   | -         |   |   |   | (16,139 | ) |
| Total other-than-temporary impairment losses on securities                         |   |   | (228,306  |   |   |   | (84,875 | ) |
| Less: Portion of gain/(loss) recognized in other comprehensive income before taxes |   |   | (39,179   | )      |   |   | 390,777 |   |
| Net other-than-temporary impairment losses on securities                           |   |   | (189,127  | )      |   |   | (475,673 | ) |
| Gain on sale of securities                                                         |   |   | 1,013     |   |   |   | 89,106 |   |
| Total other income                                                                 |   |   | 1,247,393 |   |   |   | 856,532 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Other Expenses                                                                     |   |   |      |   |   |   |   |   |
| Salaries and benefits                                                              |   |   | 2,709,575 |   |   |   | 2,447,688 |   |
| Net occupancy expense of premises                                                  |   |   | 476,141   |   |   |   | 499,902 |   |
| Furniture and equipment                                                            |   |   | 363,630   |   |   |   | 317,696 |   |
| Marketing expense                                                                  |   |   | 137,516   |   |   |   | 156,418 |   |
| Legal, audit and consulting expense                                                |   |   | 269,681   |   |   |   | 267,231 |   |
| Data processing expense                                                            |   |   | 295,359   |   |   |   | 262,991 |   |
| Federal Deposit Insurance Corporation expense                                      |   |   | 197,797   |   |   |   | 182,617 |   |
| Other operating expenses                                                           |   |   | 681,033   |   |   |   | 799,328 |   |
| Total other expenses                                                               |   |   | 5,130,732 |   |   |   | 4,933,871 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Income before income taxes                                                         |   |   | 1,192,289 |   |   |   | 1,047,966 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Income tax expense                                                                 |   |   | 271,403   |   |   |   | 244,073 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Net Income                                                                         |   | $      | 920,886   |   |   | $      | 803,893 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Earnings per Share, basic                                                          |   | $      | 0.25      |   |   | $      | 0.22 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Earnings per Share, assuming dilution                                              |   | $      | 0.25      |   |   | $      | 0.22 |   |
|                                                                               |   |   |      |   |   |   |   |   |
| Dividends per Share                                                                |   | $      | 0.12      |   |   | $      | 0.20 |   |

----

Index

|                                                                                           |   | Common Stock |       |   | Retained Earnings |   |       | Accumulated Other Comprehensive Income (Loss) |   |   | Comprehensive Income |   |   | Total  |      |
|------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|-------------------|--------|------------|-----------------------------------------------|--------|--------|----------------------|--------|--------|--------|-----------|
| Balance, December 31, 2009                                                                     |   | $            | 11,103,371 |   |              | $      | 33,458,933 |                                          |   | $      | (1,923,462           | )      |   |   |      |   | $ | 42,638,842 |   |
| Comprehensive income:                                                                          |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   |      |   |   |   |   |
| Net income                                                                                     |   |         |       |   |              |   | 803,893    |                                          |   |   |                 |   |   | $      | 803,893   |   |   |   | 803,893 |   |
| Other comprehensive income net of tax:                                                         |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   |      |   |   |   |   |   |
| Unrealized holding gains on securities available for sale, net of tax of $20,791               |   |         |       |   |              |   |       |                                          |   |   | 40,359               |   |   |   | 40,359    |   |   |   | 40,359 |   |
| Less: gain on sale of securities available for sale,  net of tax of $30,296          |   |         |       |   |              |   |       |                                          |   |   | (58,810              | )      |   |   | (58,810   | ) |   |   | (58,810 | ) |
| Less: reclassification adjustments for other-than-temporary impairment, net of tax of $161,729 |   |         |       |   |              |   |       |                                          |   |   | 313,944              |   |   |   | 313,944   |   |   |   | 313,944 |   |
| Other comprehensive income net of tax of $152,224                                              |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   | 295,493   |   |   |   |   |   |
| Total comprehensive income                                                                     |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   | 1,099,386 |   |   |   |   |   |
| Cash dividends ($.20 per share)                                                                |   |         |       |   |              |   | (724,109   | )                                             |   |   |                 |   |   |   |      |   |   |   | (724,109 | ) |
| Amortization of unearned compensation, restricted stock awards                                 |   |         |       |   |              |   | 205,260    |                                          |   |   |                 |   |   |   |      |   |   |   | 205,260 |   |
| Issuance of common stock - nonvested shares  (28,847 shares)                         |   |         | 90,291     |   |              |   | (90,291    | )                                             |   |   |                 |   |   |   |      |   |   |   | - |   |
| Issuance of common stock - vested shares  (6,522 shares)                             |   |         | 20,414     |   |              |   | 69,459     |                                          |   |   |                 |   |   |   |      |   |   |   | 89,873 |   |
| Exercise of stock options                                                                      |   |         | 12,520     |   |              |   | 19,880     |                                          |   |   |                 |   |   |   |      |   |   |   | 32,400 |   |
| Balance, March 31, 2010                                                                        |   | $            | 11,226,596 |   |              | $      | 33,743,025 |                                          |   | $      | (1,627,969           | )      |   |   |      |   |   | $ | 43,341,652 |   |
|                                                                                           |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   |      |   |   |   |   |   |
| Balance, December 31, 2010                                                                     |   | $            | 11,277,346 |   |              | $      | 34,892,905 |                                          |   | $      | (2,064,688           | )      |   |   |      |   |   | $ | 44,105,563 |   |
| Comprehensive income:                                                                          |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   |      |   |   |   |   |   |
| Net income                                                                                     |   |         |       |   |              |   | 920,886    |                                          |   |   |                 |   |   |   | 920,886   |   |   |   | 920,886 |   |
| Other comprehensive income net of tax:                                                         |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   |      |   |   |   |   |   |
| Interest rate swap, net of tax of $18,157                                                      |   |         |       |   |              |   |       |                                          |   |   | 35,247               |   |   |   | 35,247    |   |   |   | 35,247 |   |
| Unrealized holding gains on securities available for sale, net of tax of $17,293               |   |         |       |   |              |   |       |                                          |   |   | 33,569               |   |   |   | 33,569    |   |   |   | 33,569 |   |
| Less: gain on sale or call of securities available for sale, net of tax of $344                |   |         |       |   |              |   |       |                                          |   |   | (669                 | )      |   |   | (669      | ) |   |   | (669 | ) |
| Add: reclassification adjustments for other-than-temporary impairment, net of tax of $64,303   |   |         |       |   |              |   |       |                                          |   |   | 124,824              |   |   |   | 124,824   |   |   |   | 124,824 |   |
| Other comprehensive income net of tax of $99,409                                               |   |         |       |   |              |   |       |                                          |   |   |                 |   |   |   | 192,971   |   |   |   |   |   |
| Total comprehensive income                                                                     |   |         |       |   |              |   |       |                                          |   |   |                 |   |   | $      | 1,113,857 |   |   |   |   |   |
| Cash dividends ($.12 per share)                                                                |   |         |       |   |              |   | (440,371   | )                                             |   |   |                 |   |   |   |      |   |   |   | (440,371 | ) |
| Amortization of unearned compensation, restricted stock awards                                 |   |         |       |   |              |   | 35,279     |                                          |   |   |                 |   |   |   |      |   |   |   | 35,279 |   |
| Issuance of common stock - nonvested shares  (10,914 shares)                         |   |         | 34,161     |   |              |   | (34,161    | )                                             |   |   |                 |   |   |   |      |   |   |   | - |   |
| Issuance of common stock - vested shares  (4,752 shares)                             |   |         | 14,874     |   |              |   | 53,080     |                                          |   |   |                 |   |   |   |      |   |   |   | 67,954 |   |
| Exercise of stock options                                                                      |   |         | 58,011     |   |              |   | 91,558     |                                          |   |   |                 |   |   |   |      |   |   |   | 149,569 |   |
| Balance, March 31, 2011                                                                        |   | $            | 11,384,392 |   |              | $      | 35,519,176 |                                          |   | $      | (1,871,717           | )      |   |   |      |   |   | $ | 45,031,851 |   |

----

Index

Consolidated Statements of Cash Flows

|                                                                                    |   | 2011   |            |   | 2010   |   |
|-----------------------------------------------------------------------------------------|--------|--------|-----------------|--------|--------|--------|
| Cash Flows from Operating Activities                                                    |   |   |            |   |   |   |
| Net income                                                                              |   | $      | 920,886         |   |   | $      | 803,893 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:       |   |   |            |   |   |   |   |   |
| Depreciation and amortization                                                           |   |   | 303,682         |   |   |   | 313,944 |   |
| Provision for loan losses                                                               |   |   | 462,501         |   |   |   | 375,000 |   |
| Loss on sale of other real estate                                                       |   |   | -               |   |   |   | 16,139 |   |
| (Gain) on sale and call of securities                                                   |   |   | (1,013          | )      |   |   | (89,106 | ) |
| Loss on impairment of securities                                                        |   |   | 189,127         |   |   |   | 475,673 |   |
| Amortization (accretion) of security premiums, net                                      |   |   | 24,968          |   |   |   | 9,058 |   |
| Amortization of unearned compensation, net of forfeiture                                |   |   | 35,279          |   |   |   | 205,260 |   |
| Changes in assets and liabilities:                                                      |   |   |            |   |   |   |   |   |
| (Increase) in other assets                                                              |   |   | (195,357        | )      |   |   | (96,708 | ) |
| (Decrease) increase in other liabilities                                                |   |   | 126,928         |   |   |   | (398,888 | ) |
| Net cash provided by operating activities                                               |   |   | 1,867,001       |   |   |   | 1,614,265 |   |
|                                                                                    |   |   |            |   |   |   |   |   |
| Cash Flows from Investing Activities                                                    |   |   |            |   |   |   |   |   |
| Proceeds from sale of securities available for sale                                     |   |   | -               |   |   |   | 1,543,439 |   |
| Proceeds from maturities, calls and principal payments of securities available for sale |   |   | 3,081,822  |   |   |   | 2,340,984  |   |
| Purchase of securities available for sale                                               |   |   | (5,350,526      | )      |   |   | (4,112,271 | ) |
| Purchase of premises and equipment                                                      |   |   | (322,455        | )      |   |   | (751,346 | ) |
| Net decrease (increase) in loans                                                        |   |   | 4,882,418       |   |   |   | (5,020,687 | ) |
| Proceeds from sale of other real estate owned                                           |   |   | -               |   |   |   | 434,636 |   |
| Net cash provided by provided by (used in) investing activities                         |   |   | 2,291,259       |   |   |   | (5,565,245 | ) |
|                                                                                    |   |   |            |   |   |   |   |   |
| Cash Flows from Financing Activities                                                    |   |   |            |   |   |   |   |   |
| Net increase in demand deposits, NOW accounts and savings accounts                      |   |   | 2,138,481  |   |   |   | 15,228,545  |   |
| Net (decrease) in certificates of deposit                                               |   |   | (7,681,936      | )      |   |   | (13,419,625 | ) |
| Cash dividends paid on common stock                                                     |   |   | (440,371        | )      |   |   | (724,109 | ) |
| Issuance of common stock                                                                |   |   | 217,523         |   |   |   | 122,273 |   |
| Net cash provided by (used in) financing activities                                     |   |   | (5,766,303      | )      |   |   | 1,207,084 |   |
|                                                                                    |   |   |            |   |   |   |   |   |
| (Decrease) in cash and cash equivalents                                                 |   |   | (1,608,043      | )      |   |   | (2,743,896 | ) |
|                                                                                    |   |   |            |   |   |   |   |   |
| Cash and Cash Equivalents                                                               |   |   |            |   |   |   |   |   |
| Beginning                                                                               |   |   | 47,182,499      |   |   |   | 26,208,367 |   |
|                                                                                    |   |   |            |   |   |   |   |   |
| Ending                                                                                  |   | $      | 45,574,456      |   |   | $      | 23,464,471 |   |
|                                                                                    |   |   |            |   |   |   |   |   |
| Supplemental Disclosures of Cash Flow Information                                       |   |   |            |   |   |   |   |   |
| Cash payments for:                                                                      |   |   |            |   |   |   |   |   |
| Interest                                                                                |   | $      | 1,291,761       |   |   | $      | 1,557,869 |   |
|                                                                                    |   |   |            |   |   |   |   |   |
| Income taxes                                                                            |   | $      | -               |   |   | $      | - |   |
|                                                                                    |   |   |            |   |   |   |   |   |
| Supplemental Disclosures of Noncash Investing Activities                                |   |   |            |   |   |   |   |   |
| Unrealized gain on securities available for sale, net of tax effect                     |   | $      | 157,724    |   |   | $      | 295,493 |   |
| Foreclosed assets acquired in settlement of loans                                       |   | $      | 412,000         |   |   | $      | - |   |
| Unrealized gain on interest rate swap, net of taxes                                     |   | $      | 35,247          |   |   | $      | - |   |

----

Index

Notes to Consolidated Financial Statements

----

Index

|                                                     |   | March 31, 2011    |
|----------------------------------------------------------|--------|-------------------|
|                                                     |   | Amortized Cost    |   |   | Gross UnrealizedGains |   |   | Gross Unrealized(Losses) |   |   | Fair Value |   |
| Obligations of U.S. Government corporations and agencies |   | $                 | 41,947,132 |   |   | $ | 439,059 |   |   | $ | (256,061 | ) |   | $ | 42,130,130 |   |
| Obligations of states and political subdivisions         |   |              | 5,783,069 |   |   |   | 244,818 |   |   |   | (5,945 | ) |   |   | 6,021,942 |   |
| Corporate bonds                                          |   |              | 3,758,006 |   |   |   | - |   |   |   | (3,434,467 | ) |   |   | 323,539 |   |
| Mutual funds                                             |   |              | 329,493 |   |   |   | - |   |   |   | (1,565 | ) |   |   | 327,928 |   |
| FHLMC preferred bank stock                               |   |              | 9,100 |   |   |   | 19,900 |   |   |   | - |   |   |   | 29,000 |   |
|                                                     |   | $                 | 51,826,800 |   |   | $ | 703,777 |   |   | $ | (3,698,038 | ) |   | $ | 48,832,539 |   |
|                                                     |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   | December 31, 2010 |
|                                                     |   | Amortized Cost    |   |   | Gross UnrealizedGains |   |   | Gross Unrealized(Losses) |   |   | Fair Value |   |
| Obligations of U.S. Government corporations and agencies |   | $                 | 40,020,633 |   |   | $ | 353,292 |   |   | $ | (342,206 | ) |   | $ | 40,031,719 |   |
| Obligations of states and political subdivisions         |   |              | 5,467,451 |   |   |   | 154,160 |   |   |   | (2,847 | ) |   |   | 5,618,764 |   |
| Corporate bonds                                          |   |              | 3,947,133 |   |   |   | - |   |   |   | (3,395,289 | ) |   |   | 551,844 |   |
| Mutual funds                                             |   |              | 326,861 |   |   |   | - |   |   |   | (347 | ) |   |   | 326,514 |   |
| FHLMC preferred bank stock                               |   |              | 9,100 |   |   |   | - |   |   |   | - |   |   |   | 9,100 |   |
|                                                     |   | $                 | 49,771,178 |   |   | $ | 507,452 |   |   | $ | (3,740,689 | ) |   | $ | 46,537,941 |   |

----

Index

|                                   |   | March 31, 2011 |
|----------------------------------------|--------|----------------|
|                                   |   | Amortized Cost |   |   | Fair Value |   |
| Due in one year or less                |   | $              | - |   |   | $ | - |   |
| Due after one year through five years  |   |           | 14,057,541 |   |   |   | 13,999,870 |   |
| Due after five years through ten years |   |           | 5,181,834 |   |   |   | 5,354,727 |   |
| Due after ten years                    |   |           | 32,248,832 |   |   |   | 29,121,014 |   |
| Equity securities                      |   |           | 338,593 |   |   |   | 356,928 |   |
|                                   |   | $              | 51,826,800 |   |   | $ | 48,832,539 |   |

|                                                      |   | Less than 12 Months |       |   | 12 Months or More  |   | Total    |       |
|-----------------------------------------------------------|--------|---------------------|------------|--------|--------------------|--------|----------|------------|
| March 31, 2011                                            |   | Fair Value          |       |   | Unrealized(Losses) |   |     | Fair Value |   |   | Unrealized (Losses) |   |   | Fair Value |   |   | Unrealized (Losses) |   |
|                                                      |   |                |       |   |               |   |     |       |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government, corporations and agencies |   | $                   | 24,980,558 |   |               | $      | (256,061 | )          |   | $ | - |   |   | $ | - |   |   | $ | 24,980,558 |   |   | $ | (256,061 | ) |
| Obligations of states and political subdivisions          |   |                | 309,954    |   |               |   | (5,945   | )          |   |   | - |   |   |   | - |   |   |   | 309,954 |   |   |   | (5,945 | ) |
| Corporate bonds                                           |   |                | -          |   |               |   | -        |       |   |   | 323,539 |   |   |   | (3,434,467 | ) |   |   | 323,539 |   |   |   | (3,434,467 | ) |
| Subtotal, debt securities                                 |   |                | 25,290,512 |   |               |   | (262,006 | )          |   |   | 323,539 |   |   |   | (3,434,467 | ) |   |   | 25,614,051 |   |   |   | (3,696,473 | ) |
| Mutual funds                                              |   |                | 327,928    |   |               |   | (1,565   | )          |   |   | - |   |   |   | - |   |   |   | 327,928 |   |   |   | (1,565 | ) |
| Total temporary impaired securities                       |   | $                   | 25,618,440 |   |               | $      | (263,571 | )          |   | $ | 323,539 |   |   | $ | (3,434,467 | ) |   | $ | 25,941,979 |   |   | $ | (3,698,038 | ) |
|                                                      |   |                |       |   |               |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |
|                                                      |   | Less than 12 Months |       |   | 12 Months or More  |   | Total    |       |
| December 31, 2010                                         |   | Fair Value          |       |   | Unrealized(Losses) |   |     | Fair Value |   |   | Unrealized(Losses) |   |   | Fair Value |   |   | Unrealized (Losses) |   |
|                                                      |   |                |       |   |               |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government, corporations and agencies |   | $                   | 24,409,268 |   |               | $      | (342,206 | )          |   | $ | - |   |   | $ | - |   |   | $ | 24,409,268 |   |   | $ | (342,206 | ) |
| Obligations of states and political subdivisions          |   |                | 579,760    |   |               |   | (2,847   | )          |   |   | - |   |   |   | - |   |   |   | 579,760 |   |   |   | (2,847 | ) |
| Corporate bonds                                           |   |                | -          |   |               |   | -        |       |   |   | 551,844 |   |   |   | (3,395,289 | ) |   |   | 551,844 |   |   |   | (3,395,289 | ) |
| Subtotal, debt securities                                 |   |                | 24,989,028 |   |               |   | (345,053 | )          |   |   | 551,844 |   |   |   | (3,395,289 | ) |   |   | 25,540,872 |   |   |   | (3,740,342 | ) |
| Mutual funds                                              |   |                | -          |   |               |   | -        |       |   |   | 326,514 |   |   |   | (347 | ) |   |   | 326,514 |   |   |   | (347 | ) |
| Total temporary impaired securities                       |   | $                   | 24,989,028 |   |               | $      | (345,053 | )          |   | $ | 878,358 |   |   | $ | (3,395,636 | ) |   | $ | 25,867,386 |   |   | $ | (3,740,689 | ) |

----

Index

| Cost, net of OTTI loss |      |   | Fair Value |   |    | Percent of Underlying Collateral Performing |   |   | Percent of Underlying Collateral in Deferral |   |   | Percent of Underlying Collateral in Default |   | Estimated  incremental defaults required to break yield (1) |   | Current Moody's Rating |   |   | Cumulative Amount of OTTI Loss |   |   | Cumulative Other Comprehensive Loss, net of tax benefit |   |
|------------------------|-----------|--------|------------|--------|---------|---------------------------------------------|--------|--------|----------------------------------------------|--------|--------|--------------------------------------------------|--------|-----------------------------------------------------------------------|--------|-----------------------------|--------|--------|--------------------------------|--------|--------|--------------------------------------------------------------|--------|
| $                      | 359,294   |   |       | $      | 13,601  |                                        |   |   | 54.50                                        | %      |   |                                             | 28.60  | %                                                                     |   |                        | 16.90  | %      | broken                         |   | Ca     |                                                         |   | $ | 640,706 |   |   | $ | 228,157 |   |
|                   | 1,614,436 |   |       |   | 251,851 |                                        |   |   | 69.30                                        | %      |   |                                             | 17.10  | %                                                                     |   |                        | 13.60  | %      | broken                         |   | Ca     |                                                         |   |   | 385,564 |   |   |   | 899,306 |   |
|                   | 1,250,664 |   |       |   | 44,578  |                                        |   |   | 65.06                                        | %      |   |                                             | 27.40  | %                                                                     |   |                        | 7.54   | %      | broken                         |   | Ca     |                                                         |   |   | 749,336 |   |   |   | 796,017 |   |
|                   | 533,612   |   |       |   | 13,509  |                                        |   |   | 64.60                                        | %      |   |                                             | 21.70  | %                                                                     |   |                        | 13.70  | %      | broken                         |   | C      |                                                         |   |   | 466,388 |   |   |   | 343,268 |   |
| $                      | 3,758,006 |   |       | $      | 323,539 |                                        |   |   |                                         |   |   |                                             |   |                                                                  |   |                        |   |   |                           |   |   |                                                         |   |   | $ | 2,241,994 |   |   | $ | 2,266,748 |   |

|   | (1) | A break in yield for a given tranche investment means that defaults and/or deferrals have reached such a level that the specific tranche would not receive all of the contractual principal and interest cash flow by its maturity, resulting in not a temporary shortfall, but an actual loss. This column represents the percentage of additional defaults among the currently performing collateral that would result in other-than-temporary impairment and loss. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Beginning balance as of December 31, 2010                                                                                                                                                                                                                                                |   | $      | 2,052,867 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|
| Add: Amount related to the credit loss for which an other-than- temporary impairment was not previously recognized                                                                                                                                                                       |   |   | -         |   |
| Add: Increases to the amount related to the credit loss for which an other-than-temporary impairment was previously recognized                                                                                                                                                           |   |   | 189,127   |   |
| Less: Realized losses for securities sold                                                                                                                                                                                                                                                |   |   | -         |   |
| Less: Securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the Company intends to sell the security or more likely than not will be required to to sell the security before recovery of its amortized cost basis. |   |   | -         |   |
| Less: Increases in cash flows expected to be collected that are recognized over the remaining life of the security (See FASB ASC 320-10-35-35)                                                                                                                                           |   |   | -         |   |
| Ending balance as of March 31, 2011                                                                                                                                                                                                                                                      |   | $      | 2,241,994 |   |

----

Index

|                          |   | March 31, 2011    |
|-------------------------------|--------|-------------------|
|                          |   | AmortizedCost     |   |   | Gross UnrealizedGains |   |   | Gross Unrealized(Losses) |   |   | FairValue |   |
| Restricted investments:       |   |              |   |   |   |   |   |   |   |   |   | - |   |
| Federal Home Loan Bank stock  |   | $                 | 3,239,300 |   |   | $ | - |   |   | $ | - |   |   | $ | 3,239,300 |   |
| Federal Reserve Bank stock    |   |              | 99,000 |   |   |   | - |   |   |   | - |   |   |   | 99,000 |   |
| Community Bankers' Bank stock |   |              | 50,000 |   |   |   | - |   |   |   | - |   |   |   | 50,000 |   |
|                          |   | $                 | 3,388,300 |   |   | $ | - |   |   | $ | - |   |   | $ | 3,388,300 |   |
|                          |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |   | December 31, 2010 |
|                          |   | Amortized Cost    |   |   | Gross Unrealized Gains |   |   | Gross Unrealized(Losses) |   |   | FairValue |   |
| Restricted investments:       |   |              |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Federal Home Loan Bank stock  |   | $                 | 3,239,300 |   |   | $ | - |   |   | $ | - |   |   | $ | 3,239,300 |   |
| Federal Reserve Bank stock    |   |              | 99,000 |   |   |   | - |   |   |   | - |   |   |   | 99,000 |   |
| Community Bankers' Bank stock |   |              | 50,000 |   |   |   | - |   |   |   | - |   |   |   | 50,000 |   |
|                          |   | $                 | 3,388,300 |   |   | $ | - |   |   | $ | - |   |   | $ | 3,388,300 |   |

|                                                                             |   | Twelve Months EndedDecember 31, 2010 |       |   | Three Months EndedMarch 31, 2010 |                             |
|----------------------------------------------------------------------------------|--------|--------------------------------------|------------|--------|----------------------------------|----------------------------------|
| Balance at beginning of year                                                     |   | $                                    | 5,481,963  |   |                             | $                                | 5,481,963 |   |
| Provision for loan losses                                                        |   |                                 | 2,075,000  |   |                             |                             | 375,000 |   |
| Recoveries of loans previously charged-off                                       |   |                                 | 94,859     |   |                             |                             | 15,370 |   |
| Loan losses charged-off                                                          |   |                                 | (1,344,629 | )      |                             |                             | (402,802 | ) |
| Balance at end of year                                                           |   | $                                    | 6,307,193  |   |                             | $                                | 5,469,531 |   |
|                                                                             |   |                                 |       |   |                             |                             |   |   |
|                                                                             |   |                                 |       |   |                             | March 31, 2010                   |   |
| Impaired loans for which an allowance has been provided                          |   |                                 |       |   |                             | $                                | 3,059,542 |   |
| Impaired loans for which no allowance has been provided                          |   |                                 |       |   |                             |                             | 607,256 |   |
|                                                                             |   |                                 |       |   |                             | $                                | 3,666,798 |   |
|                                                                             |   |                                 |       |   |                             |                             |   |   |
| Allowance provided for impaired loans, included in the allowance for loan losses |   |                                 |       |   |                             | $                                | 1,054,000 |   |
|                                                                             |   |                                 |       |   |                             |                             |   |   |
|                                                                             |   |                                 |       |   |                             | Three Months EndedMarch 31, 2010 |   |
| Average balance in impaired loans                                                |   |                                 |       |   |                             | $                                | 3,725,047 |   |
|                                                                             |   |                                 |       |   |                             |                             |   |   |
| Interest income recognized on impaired loans                                     |   |                                 |       |   |                             | $                                | 11,740 |   |

----

Index

| Allowance for Loan Losses and Recorded Investment in Loans Receivable |
|-----------------------------------------------------------------------|
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  | As of December 31, 2010 and for the Period Ended March 31, 2011 |
|                                                                  |   | Commercial and Industrial |   |   | Commercial Real Estate |   |   | Commercial Construction |   |   | Consumer |   |   | Residential Real Estate |   |   | Home Equity Line of Credit |   |   | Total |   |
| Allowance for Loan Losses                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance at 12/31/2010                                       |   | $ | 792,796 |   |   | $ | 2,320,692 |   |   | $ | 150,513 |   |   | $ | 314,580 |   |   | $ | 1,622,830 |   |   | $ | 1,105,782 |   |   | $ | 6,307,193 |   |
| Charge-offs                                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4,683 |   |   |   | - |   |   |   | 200,018 |   |   |   | 204,701 |   |
| Recoveries                                                            |   |   | - |   |   |   | 101,000 |   |   |   | - |   |   |   | 7,146 |   |   |   | - |   |   |   | 200 |   |   |   | 108,346 |   |
| Provision                                                             |   |   | (343,800 | ) |   |   | 672,664 |   |   |   | (105 | ) |   |   | 460,977 |   |   |   | 173,653 |   |   |   | (500,888 | ) |   |   | 462,501 |   |
| Ending balance at 3/31/2011                                           |   | $ | 448,996 |   |   | $ | 3,094,356 |   |   | $ | 150,408 |   |   | $ | 778,020 |   |   | $ | 1,796,483 |   |   | $ | 405,076 |   |   | $ | 6,673,339 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balances individually evaluated for impairment                 |   | $ | 252,900 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 252,900 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balances collectivly evaluated for impairment                  |   | $ | 196,096 |   |   | $ | 3,094,356 |   |   | $ | 150,408 |   |   | $ | 778,020 |   |   | $ | 1,796,483 |   |   | $ | 405,076 |   |   | $ | 6,420,439 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans Receivable                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment                                 |   | $ | 819,646 |   |   | $ | 605,517 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 1,425,163 |   |
| Collectively evaluated for impairment                                 |   |   | 28,998,802 |   |   |   | 214,743,618 |   |   |   | 27,389,565 |   |   |   | 7,031,226 |   |   |   | 136,137,440 |   |   |   | 51,022,985 |   |   |   | 465,323,636 |   |
| Ending balance at 12/31/2010                                          |   | $ | 29,818,448 |   |   | $ | 215,349,135 |   |   | $ | 27,389,565 |   |   | $ | 7,031,226 |   |   | $ | 136,137,440 |   |   | $ | 51,022,985 |   |   | $ | 466,748,799 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment                                 |   | $ | 252,940 |   |   | $ | 296,771 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 549,711 |   |
| Collectively evaluated for impairment                                 |   |   | 27,984,657 |   |   |   | 210,664,633 |   |   |   | 27,624,122 |   |   |   | 6,528,160 |   |   |   | 137,595,004 |   |   |   | 50,823,739 |   |   |   | 461,220,315 |   |
| Ending balance at 3/31/2011                                           |   | $ | 28,237,597 |   |   | $ | 210,961,404 |   |   | $ | 27,624,122 |   |   | $ | 6,528,160 |   |   | $ | 137,595,004 |   |   | $ | 50,823,739 |   |   | $ | 461,770,026 |   |

| Credit Quality Indicators |
|---------------------------|
|                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      |   | As of March 31, 2011 |
|                      |   | Commercial and Industrial |   | Commercial Real Estate |   | Commercial Construction |   | Consumer |   |   | Residential Real Estate |   | Home Equity Line of Credit |   | Total |   |
| Grade:                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pass                      |   | $ | 23,526,521 |   |   | $ | 160,465,523 |   |   | $ | 24,765,122 |   |   | $ | 6,431,293 |   |   | $ | 130,651,287 |   |   | $ | 47,551,618 |   |   | $ | 393,391,364 |   |
| Special mention           |   |   | 2,524,512 |   |   |   | 20,738,965 |   |   |   | 2,859,000 |   |   |   | 67,249 |   |   |   | 2,741,004 |   |   |   | 1,241,479 |   |   |   | 30,172,209 |   |
| Substandard               |   |   | 1,933,624 |   |   |   | 29,756,916 |   |   |   | - |   |   |   | 29,618 |   |   |   | 3,866,999 |   |   |   | 1,996,580 |   |   |   | 37,583,737 |   |
| Doubtful                  |   |   | 252,940 |   |   |   | - |   |   |   | - |   |   |   | -  |   |   |   | 335,714 |   |   |   | 34,062 |   |   |   | 622,716 |   |
| Loss                      |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                     |   | $ | 28,237,597 |   |   | $ | 210,961,404 |   |   | $ | 27,624,122 |   |   | $ | 6,528,160 |   |   | $ | 137,595,004 |   |   | $ | 50,823,739 |   |   | $ | 461,770,026 |   |
|                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      |   | As of December 31, 2010 |
|                      |   | Commercial and Industrial |   | Commercial Real Estate |   | Commercial Construction |   | Consumer |   |   | Residential Real Estate |   | Home Equity Line of Credit |   | Total |   |
| Grade:                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Pass                      |   | $ | 24,489,238 |   |   | $ | 160,944,161 |   |   | $ | 22,854,565 |   |   | $ | 6,935,003 |   |   | $ | 129,087,024 |   |   | $ | 46,551,709 |   |   | $ | 390,861,700 |   |
| Special mention           |   |   | 3,118,443 |   |   |   | 41,077,145 |   |   |   | 4,535,000 |   |   |   | 59,602 |   |   |   | 2,834,248 |   |   |   | 1,839,000 |   |   |   | 53,463,438 |   |
| Substandard               |   |   | 1,923,445 |   |   |   | 13,327,829 |   |   |   | - |   |   |   | 36,621 |   |   |   | 3,880,454 |   |   |   | 1,986,196 |   |   |   | 21,154,545 |   |
| Doubtful                  |   |   | 287,322 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 355,714 |   |   |   | 646,080 |   |   |   | 1,289,116 |   |
| Loss                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                     |   | $ | 29,818,448 |   |   | $ | 215,349,135 |   |   | $ | 27,389,565 |   |   | $ | 7,031,226 |   |   | $ | 136,137,440 |   |   | $ | 51,022,985 |   |   | $ | 466,748,799 |   |

----

Index

|                       |   | As of March 31, 2011    |
|----------------------------|--------|------------------------------|
|                       |   | 30-59 Days Past Due     |   | 60-89 Days Past Due |   | Greater than 90 Days |   | Total Past Due |   | Current |   |   | Total Financing Receivables |   | Carrying Amount > 90 Days and Accruing |   | Nonaccruals |   |
| Commercial and industrial  |   | $                            | 785,191 |   |   | $ | 352,765 |   |   | $ | - |   |   | $ | 1,137,956 |   |   | $ | 27,099,641 |   |   | $ | 28,237,597 |   |   | $ | - |   |   | $ | 362,221 |   |
| Commercial real estate     |   |                         | 4,122,663 |   |   |   | 34,832 |   |   |   | 187,490 |   |   |   | 4,344,985 |   |   |   | 206,616,419 |   |   |   | 210,961,404 |   |   |   | - |   |   |   | 187,490 |   |
| Commercial construction    |   |                         | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 27,624,122 |   |   |   | 27,624,122 |   |   |   | - |   |   |   | - |   |
| Consumer                   |   |                         | 106,772 |   |   |   | - |   |   |   | 8,512 |   |   |   | 115,284 |   |   |   | 6,412,876 |   |   |   | 6,528,160 |   |   |   | - |   |   |   | 10,479 |   |
| Residential real estate    |   |                         | 2,697,858 |   |   |   | 494,782 |   |   |   | 502,119 |   |   |   | 3,694,759 |   |   |   | 133,900,245 |   |   |   | 137,595,004 |   |   |   | - |   |   |   | 764,410 |   |
| Home equity line of credit |   |                         | 890,645 |   |   |   | 129,676 |   |   |   | 351,792 |   |   |   | 1,372,113 |   |   |   | 49,451,626 |   |   |   | 50,823,739 |   |   |   | - |   |   |   | 385,854 |   |
| Total                      |   | $                            | 8,603,129 |   |   | $ | 1,012,055 |   |   | $ | 1,049,913 |   |   | $ | 10,665,097 |   |   | $ | 451,104,929 |   |   | $ | 461,770,026 |   |   | $ | - |   |   | $ | 1,710,454 |   |
|                       |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   | As of December 31, 2010 |
|                       |   | 30-59 Days Past Due          |   | 60-89 Days Past Due |   | Greater than 90 Days |   | Total Past Due |   | Current |   |   | Total Financing Receivables |   | Carrying Amount > 90 Days and Accruing |   | Nonaccruals |   |
| Commercial and industrial  |   | $                            | 84,131 |   |   | $ | 98,475 |   |   | $ | 95,696 |   |   | $ | 278,302 |   |   | $ | 29,540,146 |   |   | $ | 29,818,448 |   |   | $ | 75,102 |   |   | $ | 368,771 |   |
| Commercial real estate     |   |                         | 427,995 |   |   |   | - |   |   |   | 187,490 |   |   |   | 615,485 |   |   |   | 214,733,650 |   |   |   | 215,349,135 |   |   |   | 187,490 |   |   |   | 312,672 |   |
| Commercial construction    |   |                         | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 27,389,565 |   |   |   | 27,389,565 |   |   |   | - |   |   |   | - |   |
| Consumer                   |   |                         | 100,219 |   |   |   | - |   |   |   | - |   |   |   | 100,219 |   |   |   | 6,931,007 |   |   |   | 7,031,226 |   |   |   | - |   |   |   | 12,197 |   |
| Residential real estate    |   |                         | 1,208,344 |   |   |   | 551,353 |   |   |   | 502,119 |   |   |   | 2,261,816 |   |   |   | 133,875,624 |   |   |   | 136,137,440 |   |   |   | - |   |   |   | 769,000 |   |
| Home equity line of credit |   |                         | 363,641 |   |   |   | 351,792 |   |   |   | 612,018 |   |   |   | 1,327,451 |   |   |   | 49,695,534 |   |   |   | 51,022,985 |   |   |   | - |   |   |   | 646,080 |   |
| Total                      |   | $                            | 2,184,330 |   |   | $ | 1,001,620 |   |   | $ | 1,397,323 |   |   | $ | 4,583,273 |   |   | $ | 462,165,526 |   |   | $ | 466,748,799 |   |   | $ | 262,592 |   |   | $ | 2,108,720 |   |

|                                 |   | March 31, 2011      |
|--------------------------------------|--------|---------------------|
|                                 |   | Recorded Investment |   | Unpaid Principal Balance |   | Related Allowance |   | Average Recorded Investment |   | Interest Income Recognized |   |
| With no specific allowance recorded: |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial            |   | $                   | 109,281 |   |   | $ | 109,281 |   |   | $ | - |   |   | $ | 111,188 |   |   | $ | - |   |
| Commercial real estate               |   |                | 187,490 |   |   |   | 187,490 |   |   |   | - |   |   |   | 187,490 |   |   |   | - |   |
| Commercial construction              |   |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                 |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial            |   |                | 252,940 |   |   |   | 252,940 |   |   |   | 252,900 |   |   |   | 254,140 |   |   |   | - |   |
| Commercial real estate               |   |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial construction              |   |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                 |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total:                               |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial            |   |                | 362,221 |   |   |   | 362,221 |   |   |   | 252,900 |   |   |   | 365,328 |   |   |   | - |   |
| Commercial real estate               |   |                | 187,490 |   |   |   | 187,490 |   |   |   | - |   |   |   | 187,490 |   |   |   | - |   |
| Commercial construction              |   |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                |   | $                   | 549,711 |   |   | $ | 549,711 |   |   | $ | 252,900 |   |   | $ | 552,818 |   |   | $ | - |   |
|                                 |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 |   | December 31, 2010   |
|                                 |   | Recorded Investment |   | Unpaid Principal Balance |   | Related Allowance |   | Average Recorded Investment |   | Interest Income Recognized |   |
| With no specific allowance recorded: |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial            |   | $                   | 133,689 |   |   | $ | 133,689 |   |   | $ | - |   |   | $ | 167,891 |   |   | $ | 3,317 |   |
| Commercial real estate               |   |                | 312,672 |   |   |   | 312,672 |   |   |   | - |   |   |   | 333,554 |   |   |   | - |   |
| Commercial construction              |   |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                 |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial            |   |                | 829,092 |   |   |   | 829,092 |   |   |   | 641,900 |   |   |   | 856,290 |   |   |   | 46,044 |   |
| Commercial real estate               |   |                | 149,710 |   |   |   | 149,710 |   |   |   | 148,800 |   |   |   | 150,345 |   |   |   | 8,454 |   |
| Commercial construction              |   |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                 |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total:                               |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial and industrial            |   |                | 962,781 |   |   |   | 962,781 |   |   |   | 641,900 |   |   |   | 1,024,181 |   |   |   | 49,361 |   |
| Commercial real estate               |   |                | 462,382 |   |   |   | 462,382 |   |   |   | 148,800 |   |   |   | 483,899 |   |   |   | 8,454 |   |
| Commercial construction              |   |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                |   | $                   | 1,425,163 |   |   | $ | 1,425,163 |   |   | $ | 790,700 |   |   | $ | 1,508,080 |   |   | $ | 57,815 |   |

----

Index

| (In thousands)                                                                                                                                                                                                                                                                        |   | March 31, 2011 |   |   | December 31, 2010 |   |   | March 31, 2010 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|--------|----------------|--------|
| Non-accrual loans                                                                                                                                                                                                                                                                     |   | $              | 1,710  |   |              | $      | 2,109  |           |   | $ | 3,420 |   |
| Restructured loans*                                                                                                                                                                                                                                                                   |   |           | -      |   |              |   | -      |           |   |   | - |   |
| Other real estate owned                                                                                                                                                                                                                                                               |   |           | 3,233  |   |              |   | 2,821  |           |   |   | 2,029 |   |
| Other repossessed assets owned                                                                                                                                                                                                                                                        |   |           | 5      |   |              |   | 21     |           |   |   | 61 |   |
| Non-performing corporate bond investments, at fair value                                                                                                                                                                                                                              |   |           | 324    |   |              |   | 552    |           |   |   | 1,828 |   |
| Total non-performing assets                                                                                                                                                                                                                                                           |   | $              | 5,272  |   |              | $      | 5,503  |           |   | $ | 7,338 |   |
|                                                                                                                                                                                                                                                                                  |   |           |   |   |              |   |   |           |   |   |   |   |
| Loans past due 90 days accruing interest                                                                                                                                                                                                                                              |   | $              | -      |   |              | $      | 263    |           |   | $ | 197 |   |
|                                                                                                                                                                                                                                                                                  |   |           |   |   |              |   |   |           |   |   |   |   |
| Allowance for loan losses to total loans                                                                                                                                                                                                                                              |   |           | 1.45   | %      |              |   | 1.35   | %              |   |   | 1.16 | % |
| Non-accrual loans to total loans                                                                                                                                                                                                                                                      |   |           | 0.37   | %      |              |   | 0.45   | %              |   |   | 0.72 | % |
| Allowance for loan losses to non-performing loans                                                                                                                                                                                                                                     |   |           | 390.15 | %      |              |   | 299.10 | %              |   |   | 159.83 | % |
| ________________                                                                                                                                                                                                                                                                      |   |           |   |   |              |   |   |           |   |   |   |   |
| * Restructured loans on non-accrual status are included with non-accrual loans and not restructured loans. At March 31, 2011 and December 31, 2010, there was one loan totalling $252,000 and $255,000, respectively, that was both restructured and on non-accrual status. |   |

----

Index

| (In thousands)                                |   | March 31, 2011 |
|-----------------------------------------------|--------|----------------|
| Derivatives designated as hedging instruments |   |           | Notional/ Contract Amount |   |   | Estimated NetFair Value |   |   | Fair Value Balance Sheet Location |   |   | Expiration Date |   |   | Fixed Rate |   |
| Interest rate swap-10 year cash flow          |   | $              | 4,000 |   |   | $ | 72 |   |   | Other Assets |   |   | 9/15/2020 |   |   | 3.21 | % |

|                                           |   | March 31, 2011                                                                             |   |
|------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|
| Derivatives in cash flow hedging relationships |   | Amount of Gain (Loss)Recognized in OCI on Derivatives, net of tax (Effective Portion) |   | Location of Gain or(Loss) Recognized inIncome on Derivative (Ineffective Portion)  |   | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |   |
| Interest rate swap -10 year cash flow          |   | $                                                                                          | 35     |   |   | Not applicable |   | $ | - |   |

| (In thousands)                               |   | December 31, 2010         |   |
|----------------------------------------------|--------|---------------------------|--------|
| Derivatives designated ashedging instruments |   | Notional/ Contract Amount |   |   | Estimated Net Fair Value |   |   | Fair Value Balance Sheet Location |   |   | Expiration Date |   | Fixed Rate |   |
|  Interest rate swap-10 year cash flow   |   | $                         | 4,000  |   |   | $ | 19 |   |   | Other Assets |   |   | 9/15/2020 |   |   | 3.21 | % |

----

Index

|                                           |   | December 31, 2010                                                                         |   |
|------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|
| Derivatives in cash flow hedging relationships |   | Amount of Gain (Loss)Recognized in OCI onDerivatives, net of tax (Effective Portion) |   |   |   Location of Gain or(Loss) Recognized inIncome on Derivative (Ineffective Portion)  |   |   | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion) |   |
|                                           |   |                                                                                      |   |   |   |   |   |   |   |
| Interest rate swap -10 year cash flow          |   | $                                                                                         | 12     |   |   | Not applicable |   |   | $ | - |   |

|                                              |   | Three Months Ended |      |   | Three Months Ended |   |
|---------------------------------------------------|--------|--------------------|-----------|--------|--------------------|--------|
|                                              |   | March 31, 2011     |      |   | March 31, 2010     |   |
|                                              |   | Shares             |      |   | Per Share Amount   |   |   | Shares |   |   | Per Share Amount |   |
|                                              |   |               |      |   |               |   |   |   |   |   |   |   |
| Basic earnings per share                          |   |               | 3,655,354 |   |               | $      | 0.25 |   |   |   | 3,602,776 |   |   | $ | 0.22 |   |
|                                              |   |               |      |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Effect of dilutive securities, stock-based awards |   |               | 14,175    |   |               |   |   |   |   |   | 15,356 |   |   |   |   |   |
|                                              |   |               |      |   |               |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |               | 3,669,529 |   |               | $      | 0.25 |   |   |   | 3,618,132 |   |   | $ | 0.22 |   |

----

Index

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Three Months Ended March 31, 2011 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Number of Shares                  |   |   | Weighted Average Exercise Price |   |   | Average Intrinsic Value (1) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                              |   |   |   |   |   |   |   |
| Outstanding at January 1, 2011                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                              | 42,266 |   |   | $ | 10.84 |   |   |   |   |
| Granted                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                              | - |   |   |   |   |   |   |   |   |
| Exercised                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                              | (18,534 | ) |   |   | 8.07 |   |   |   |   |
| Forfeited                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                              | - |   |   |   |   |   |   |   |   |
| Outstanding at March 31, 2011                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                              | 23,732 |   |   | $ | 13.00 |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                              |   |   |   |   |   |   |   |   |   |
| Exercisable at end of quarter                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                              | 23,732 |   |   |   |   |   |   | $ | 19,935 |   |
| Weighted-average fair value per option of options granted during the year                                                                                                                                                                                                                                                                                                                                                                                             |   |                              | - |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                          |   |                              |   |   |   |   |   |   |   |   |   |   |
| (1)  The aggregate intrinsic value of stock options in the table above reflects the pre-tax intrinsic value (the amount by which the March 31, 2011 market value of the underlying stock option exceeded the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2011. This amount changes based on the changes in the market value of the Company’s stock. |   |

----

Index

|                         |   | Three Months Ended March 31, 2011 |    |
|------------------------------|--------|-----------------------------------|---------|
|                         |   | Shares                            |    |   | Weighted Average Grant Date Fair Value |   |
|                         |   |                              |    |   |   |   |
| Nonvested at January 1, 2011 |   |                              | 33,772  |   |   | $ | 13.61 |   |
|                         |   |                              |    |   |   |   |   |   |
| Granted                      |   |                              | 14,466  |   |   | $ | 14.30 |   |
| Vested                       |   |                              | (15,666 | ) |   | $ | 16.67 |   |
| Forfeited                    |   |                              | -       |   |   |   |   |   |
| Nonvested at March 31, 2011  |   |                              | 32,572  |   |   | $ | 12.28 |   |

|                         |   |  Three Months Ended March 31, 2011 |   |
|------------------------------|--------|-----------------------------------------|--------|
|                         |   | Performance Based Stock Rights          |   |   | Weighted Average Fair Value |   |
|                         |   |                                    |   |   |   |   |
| Nonvested at January 1, 2011 |   |                                    | 22,858 |   |   | $ | 11.65 |   |
|                         |   |                                    |   |   |   |   |   |   |
| Granted                      |   |                                    | 9,714  |   |   | $ | 14.30 |   |
| Vested                       |   |                                    | -      |   |   |   |   |   |
| Forfeited                    |   |                                    | -      |   |   |   |   |   |
| Nonvested at March 31, 2011  |   |                                    | 32,572 |   |   | $ | 12.44 |   |

----

Index

|   | Level 1 – |   | Valuation is based on quoted prices in active markets for identical assets and liabilities.                                                                                                                                                                                                                                                                        |
|--------|-----------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |            |   |                                                                                                                                                                                                                                                                                                                                                               |
|   | Level 2 – |   | Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. |
|   |            |   |                                                                                                                                                                                                                                                                                                                                                               |
|   | Level 3 – |   | Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.                                                                                                                                                                                                                      |

----

Index

|                                                     |   | Fair Value Measurements Using |   |
|----------------------------------------------------------|--------|-------------------------------|--------|
| (In thousands)                                           |   | Balance                       |   |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | Significant OtherObervable Inputs(Level 2) |   |   | SignicantUnobservableInputs (Level 3) |   |
| Assets at March 31, 2011                                 |   |                          |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities:                           |   |                          |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government corporations and agencies |   | $                             | 42,130 |   |   | $ | - |   |   | $ | 42,130 |   |   | $ | - |   |
| Obligations of states and political subdivisions         |   |                          | 6,022  |   |   |   | - |   |   |   | 6,022 |   |   |   | - |   |
| Corporate bonds                                          |   |                          | 324    |   |   |   | - |   |   |   | - |   |   |   | 324 |   |
| Mutual funds                                             |   |                          | 328    |   |   |   | 328 |   |   |   | - |   |   |   | - |   |
| FHLMC preferred stock                                    |   |                          | 29     |   |   |   | - |   |   |   | 29 |   |   |   | - |   |
| Total available for sale securities                      |   |                          | 48,833 |   |   |   | 328 |   |   |   | 48,181 |   |   |   | 324 |   |
|                                                     |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap                                       |   |                          | 72     |   |   |   | - |   |   |   | 72 |   |   |   | - |   |
| Total assets at fair value                               |   | $                             | 48,905 |   |   | $ | 328 |   |   | $ | 48,253 |   |   | $ | 324 |   |
|                                                     |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets at December 31, 2010                              |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities:                           |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of U.S. Government corporations and agencies |   | $                             | 40,032 |   |   | $ | - |   |   | $ | 40,032 |   |   | $ | - |   |
| Obligations of states and political subdivisions         |   |                          | 5,619  |   |   |   | - |   |   |   | 5,619 |   |   |   | - |   |
| Corporate bonds                                          |   |                          | 552    |   |   |   | - |   |   |   | - |   |   |   | 552 |   |
| Mutual funds                                             |   |                          | 326    |   |   |   | 326 |   |   |   | - |   |   |   | - |   |
| FHLMC preferred stock                                    |   |                          | 9      |   |   |   | - |   |   |   | 9 |   |   |   | - |   |
| Total available for sale securities                      |   |                          | 46,538 |   |   |   | 326 |   |   |   | 45,660 |   |   |   | 552 |   |
|                                                     |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap                                       |   |                          | 19     |   |   |   | - |   |   |   | 19 |   |   |   | - |   |
| Total assets at fair value                          |   | $                             | 46,557 |   |   | $ | 326 |   |   | $ | 45,679 |   |   | $ |   552 |   |

|                          |   | Total Gains (Losses) Realized / Unrealized |   |
|-------------------------------|--------|--------------------------------------------|--------|
| (In thousands)                |   | BalanceJanuary 1,2011                      |   |   | Included inEarnings |   |   | Included in Other Comprehensive Income |   |   | Transfers in and/or out of Level 3 and 2 |   |   | BalanceMarch 31, 2011 |   |
| Available for sale securities |   | $                                          | 552    |   |   | $ | (189 | ) |   | $ | (39 | ) |   | $ | - |   |   | $ | 324 |   |

|                          |   | Total Gains (Losses) Realized / Unrealized |   |
|-------------------------------|--------|--------------------------------------------|--------|
| (In thousands)                |   | BalanceJanuary 1,2010                      |   |   | Included inEarnings |   |   | Included in Other Comprehensive Income |   |   | Transfers in and/or out of Level 3 and 2 |   |   | BalanceDecember 31, 2010 |   |
| Available for sale securities |   | $                                          | 1,912  |   |   | $ | (1,394 | ) |   | $ | 34 |   |   | $ | - |   |   | $ | 552 |   |

----

Index

|                         |   | Carrying Value at March 31, 2011    |   |
|------------------------------|--------|-------------------------------------|--------|
| (In thousands)               |   | Balance as of March 31, 2011        |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |   | Significant Other Observable Inputs (Level 2) |   | Significant Other Observable Inputs (Level 3) |   |
| Assets:                      |   |                                |   |   |   |   |   |   |   |   |   |   |
| Impaired loans, net          |   | $                                   | 297    |   |   | $ | - |   |   | $ | - |   |   | $ | 297 |   |
| Other real estate owned, net |   |                                | 3,233  |   |   |   | - |   |   |   | 3,233 |   |   |   | - |   |
|                         |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         |   | Carrying Value at December 31, 2010 |   |
| (In thousands)               |   | Balance as of March 31, 2011        |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |   | Significant Other Observable Inputs (Level 2) |   | Significant Other Observable Inputs (Level 3) |   |
| Assets:                      |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans, net          |   | $                                   | 634    |   |   | $ | - |   |   | $ | 438 |   |   | $ | 196 |   |
| Other real estate owned, net |   |                                | 2,821  |   |   |   | - |   |   |   | 2,821 |   |   |   | - |   |

----

Index

----

Index

|                                                                   |   | March 31, 2011 |    |   | December 31, 2010 |   |
|------------------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                                                   |   | CarryingAmount |    |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| (In thousands)                                                         |   |           |    |   |              |   |   |   |   |   |   |   |
| Financial assets:                                                      |   |           |    |   |              |   |   |   |   |   |   |   |
| Cash and short-term investments                                        |   | $              | 45,565  |   |              | $      | 45,565 |   |   | $ | 47,171 |   |   | $ | 47,171 |   |
| Federal funds sold                                                     |   |           | 10      |   |              |   | 10 |   |   |   | 11 |   |   |   | 11 |   |
| Securities                                                             |   |           | 48,833  |   |              |   | 48,833 |   |   |   | 46,538 |   |   |   | 46,538 |   |
| Restricted investments                                                 |   |           | 3,388   |   |              |   | 3,388 |   |   |   | 3,388 |   |   |   | 3,388 |   |
| Loans, net                                                             |   |           | 455,097 |   |              |   | 478,986 |   |   |   | 460,442 |   |   |   | 479,009 |   |
| Accrued interest receivable                                            |   |           | 1,625   |   |              |   | 1,625 |   |   |   | 1,488 |   |   |   | 1,488 |   |
| Interest rate swap                                                     |   |           | 72      |   |              |   | 72 |   |   |   | 19 |   |   |   | 19 |   |
| Total financial assets                                                 |   | $              | 554,590 |   |              | $      | 578,479 |   |   | $ | 559,057 |   |   | $ | 577,624 |   |
|                                                                   |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                 |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                               |   | $              | 514,513 |   |              | $      | 508,629 |   |   | $ | 520,056 |   |   | $ | 524,324 |   |
| FHLB advances                                                          |   |           | 25,000  |   |              |   | 26,144 |   |   |   | 25,000 |   |   |   | 26,247 |   |
| Company obligated mandatorily  redeemable capital securities |   |           | 4,124   |   |              |   | 4,425 |   |   |   | 4,124 |   |   |   | 4,696 |   |
| Accrued interest payable                                               |   |           | 473     |   |              |   | 473 |   |   |   | 464 |   |   |   | 464 |   |
| Total financial liabilities                                            |   | $              | 554,110 |   |              | $      | 539,671 |   |   | $ | 549,644 |   |   | $ | 555,731 |   |

ITEM 2.  MANAGEMENT’S 

----

Index

----

Index

----

Index

----

Index

----

Index

|                                                                                                                    |   | Three Months Ended March 31, 2011 |    |   | Three Months Ended March 31, 2010 |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|--------|-----------------------------------|--------|
| (In thousands)                                                                                                          |   | Average                           |    |   | Income/                           |   |   | Average |   |   | Average |   |   | Income/ |   |   | Average |   |
| Assets                                                                                                                  |   | Balances                          |    |   | Expense                           |   |   | Rate |   |   | Balances |   |   | Expense |   |   | Rate |   |
| Loans                                                                                                                   |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                                 |   | $                                 | 445,456 |   |                              | $      | 6,328 |   |   |   | 5.76 | % |   | $ | 449,292 |   |   | $ | 6,529 |   |   |   | 5.89 | % |
| Tax-exempt (1)                                                                                                          |   |                              | 15,851  |   |                              |   | 268 |   |   |   | 6.85 | % |   |   | 14,127 |   |   |   | 245 |   |   |   | 7.05 | % |
| Nonaccrual (2)                                                                                                          |   |                              | 1,938   |   |                              |   |   |   |   |   |   |   |   |   | 3,732 |   |   |   | - |   |   |   | - |   |
| Total loans                                                                                                             |   |                              | 463,245 |   |                              |   | 6,596 |   |   |   | 5.77 | % |   |   | 467,151 |   |   |   | 6,774 |   |   |   | 5.88 | % |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                                                                                                              |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                                 |   |                              | 45,531  |   |                              |   | 251 |   |   |   | 2.20 | % |   |   | 35,616 |   |   |   | 309 |   |   |   | 3.48 | % |
| Tax-exempt (1)                                                                                                          |   |                              | 5,843   |   |                              |   | 88 |   |   |   | 6.00 | % |   |   | 5,766 |   |   |   | 91 |   |   |   | 6.25 | % |
| Total securities                                                                                                        |   |                              | 51,374  |   |                              |   | 339 |   |   |   | 2.64 | % |   |   | 41,382 |   |   |   | 400 |   |   |   | 3.86 | % |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits in banks                                                                                                       |   |                              | 41,737  |   |                              |   | 25 |   |   |   | 0.24 | % |   |   | 17,181 |   |   |   | 8 |   |   |   | 0.19 | % |
| Federal funds sold                                                                                                      |   |                              | 11      |   |                              |   | - |   |   |   | 0.29 | % |   |   | 9 |   |   |   | - |   |   |   | 0.15 | % |
| Total earning assets                                                                                                    |   |                              | 556,367 |   |                              |   | 6,960 |   |   |   | 5.07 | % |   |   | 525,723 |   |   |   | 7,182 |   |   |   | 5.54 | % |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less: Reserve for loan losses                                                                                           |   |                              | (6,434  | )      |                              |   |   |   |   |   |   |   |   |   | (5,492 | ) |   |   |   |   |   |   |   |   |
| Cash and due from banks                                                                                                 |   |                              | 5,273   |   |                              |   |   |   |   |   |   |   |   |   | 5,729 |   |   |   |   |   |   |   |   |   |
| Bank premises and equipment, net                                                                                        |   |                              | 14,140  |   |                              |   |   |   |   |   |   |   |   |   | 14,481 |   |   |   |   |   |   |   |   |   |
| Other real estate owned                                                                                                 |   |                              | 3,110   |   |                              |   |   |   |   |   |   |   |   |   | 2,465 |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                                            |   |                              | 23,467  |   |                              |   |   |   |   |   |   |   |   |   | 22,513 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                                            |   | $                                 | 595,923 |   |                              |   |   |   |   |   |   |   |   | $ | 565,419 |   |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Shareholders' Equity                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                                                                                         |   | $                                 | 71,194  |   |                              |   |   |   |   |   |   |   |   | $ | 63,722 |   |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                                                               |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW accounts                                                                                                            |   |                              | 135,822 |   |                              |   | 153 |   |   |   | 0.46 | % |   |   | 90,863 |   |   |   | 133 |   |   |   | 0.59 | % |
| Money market accounts                                                                                                   |   |                              | 81,258  |   |                              |   | 90 |   |   |   | 0.45 | % |   |   | 59,331 |   |   |   | 110 |   |   |   | 0.75 | % |
| Savings accounts                                                                                                        |   |                              | 55,528  |   |                              |   | 36 |   |   |   | 0.26 | % |   |   | 48,651 |   |   |   | 59 |   |   |   | 0.49 | % |
| Time deposits                                                                                                           |   |                              | 173,304 |   |                              |   | 728 |   |   |   | 1.70 | % |   |   | 199,572 |   |   |   | 973 |   |   |   | 1.98 | % |
| Total interest-bearing deposits                                                                                         |   |                              | 445,912 |   |                              |   | 1,007 |   |   |   | 0.92 | % |   |   | 398,417 |   |   |   | 1,275 |   |   |   | 1.30 | % |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds purchased                                                                                                 |   |                              | 8       |   |                              |   | - |   |   |   | 0.67 | % |   |   | - |   |   |   | - |   |   |   | - |   |
| Federal Home Loan Bank advances                                                                                         |   |                              | 25,000  |   |                              |   | 245 |   |   |   | 3.91 | % |   |   | 50,000 |   |   |   | 274 |   |   |   | 2.19 | % |
| Capital securities of subsidiary trust                                                                                  |   |                              | 4,124   |   |                              |   | 49 |   |   |   | 4.76 | % |   |   | 4,124 |   |   |   | 19 |   |   |   | 1.87 | % |
| Total interest-bearing liabilities                                                                                      |   |                              | 475,044 |   |                              |   | 1,301 |   |   |   | 1.11 | % |   |   | 452,541 |   |   |   | 1,568 |   |   |   | 1.40 | % |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                                                                       |   |                              | 5,077   |   |                              |   |   |   |   |   |   |   |   |   | 5,583 |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                                                                                                    |   |                              | 44,608  |   |                              |   |   |   |   |   |   |   |   |   | 43,573 |   |   |   |   |   |   |   |   |   |
| Total liabilities & shareholders' equity                                                                            |   | $                                 | 595,923 |   |                              |   |   |   |   |   |   |   |   | $ | 565,419 |   |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread                                                                                                     |   |                              |    |   |                              | $      | 5,659 |   |   |   | 3.96 | % |   |   |   |   |   | $ | 5,614 |   |   |   | 4.14 | % |
|                                                                                                                    |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense as a percent of average earning assets                                                                 |   |                              |    |   |                              |   |   |   |   |   | 0.95 | % |   |   |   |   |   |   |   |   |   |   | 1.28 | % |
| Net interest margin                                                                                                     |   |                              |    |   |                              |   |   |   |   |   | 4.12 | % |   |   |   |   |   |   |   |   |   |   | 4.33 | % |
| ______________________                                                                                                  |   |                              |    |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Income and rates on non-taxable assets are computed on a tax equivalent basis using a federal tax rate of 34%. |   |                              |    |   |                              |
| (2) Nonaccrual loans are included in the average balance of total loans and total earning assets.                  |   |                              |    |   |                              |   |   |   |   |   |   |   |   |

----

Index

|                                                                                                                    |   | Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010 |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|
|                                                                                                                    |   |                                                                            |   |   | Due to |   |   | Due to |   |
| (In thousands)                                                                                                          |   | Change                                                                          |   |   | Volume |   |   | Rate |   |
| Interest Income                                                                                                         |   |                                                                            |   |   |   |   |   |   |   |
| Loans; taxable                                                                                                          |   | $                                                                               | (201   | ) |   | $ | (56 | ) |   | $ | (145 | ) |
| Loans; tax-exempt (1)                                                                                                   |   |                                                                            | 23     |   |   |   | 30 |   |   |   | (7 | ) |
| Securities; taxable                                                                                                     |   |                                                                            | (58    | ) |   |   | 86 |   |   |   | (144 | ) |
| Securities; tax-exempt (1)                                                                                              |   |                                                                            | (3     | ) |   |   | 1 |   |   |   | (4 | ) |
| Deposits in banks                                                                                                       |   |                                                                            | 17     |   |   |   | 11 |   |   |   | 6 |   |
| Federal funds sold                                                                                                      |   |                                                                            | -      |   |   |   | - |   |   |   | - |   |
| Total interest income                                                                                                   |   |                                                                            | (222   | ) |   |   | 72 |   |   |   | (294 | ) |
|                                                                                                                    |   |                                                                            |   |   |   |   |   |   |   |   |   |   |
| Interest Expense                                                                                                        |   |                                                                            |   |   |   |   |   |   |   |   |   |   |
| NOW accounts                                                                                                            |   |                                                                            | 20     |   |   |   | 66 |   |   |   | (46 | ) |
| Money market accounts                                                                                                   |   |                                                                            | (20    | ) |   |   | 41 |   |   |   | (61 | ) |
| Savings accounts                                                                                                        |   |                                                                            | (23    | ) |   |   | 8 |   |   |   | (31 | ) |
| Time deposits                                                                                                           |   |                                                                            | (245   | ) |   |   | (128 | ) |   |   | (117 | ) |
| Federal funds purchased and securities sold under agreements to repurchase                                         |   |                                                                            | -      |   |   |   | - |   |   |   | - |   |
| Federal Home Loan Bank advances                                                                                         |   |                                                                            | (29    | ) |   |   | (137 | ) |   |   | 108 |   |
| Capital securities of subsidiary trust                                                                                  |   |                                                                            | 30     |   |   |   | - |   |   |   | 30 |   |
| Total interest expense                                                                                                  |   |                                                                            | (267   | ) |   |   | (150 | ) |   |   | (117 | ) |
| Net interest income                                                                                                     |   | $                                                                               | 45     |   |   | $ | 222 |   |   | $ | (177 | ) |
| ___________________                                                                                                     |   |                                                                            |   |   |   |   |   |   |   |   |   |   |
| (1) Income and rates on non-taxable assets are computed on a tax equivalent basis using a federal tax rate of 34%. |   |

----

Index

----

Index

----

Index

|                                                                |   | March 31, 2011 |    |   | December 31, 2010 |   |
|---------------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                                                |   |           |    |   |              |   |
| Tier 1 Capital:                                                     |   |           |    |   |              |   |
| Shareholders' Equity                                                |   | $              | 45,032  |   |              | $      | 44,106 |   |
| Plus: Unrealized loss on securities available for sale/FAS 158, net |   |           | 1,976   |   |              |   | 2,134 |   |
| Less: Acumulated net gain on cash flow hedge                        |   |           | 104     |   |              |   | 69 |   |
| Plus: Company-obligated mandatorily redeemable capital securities   |   |           | 4,000   |   |              |   | 4,000 |   |
| Less: Disallowed deferred tax assets                                |   |           | 78      |   |              |   | - |   |
| Total Tier 1 Capital                                                |   |           | 50,826  |   |              |   | 50,171 |   |
|                                                                |   |           |    |   |              |   |   |   |
| Tier 2 Capital:                                                     |   |           |    |   |              |   |   |   |
| Allowable Allowance for Loan Losses                                 |   |           | 5,488   |   |              |   | 5,558 |   |
|                                                                |   |           |    |   |              |   |   |   |
| Total Capital:                                                      |   |           | 56,314  |   |              |   | 55,729 |   |
|                                                                |   |           |    |   |              |   |   |   |
| Risk Weighted Assets:                                               |   | $              | 437,806 |   |              | $      | 443,923 |   |
|                                                                |   |           |    |   |              |   |   |   |
| Regulatory Capital Ratios:                                          |   |           |    |   |              |   |   |   |
| Leverage Ratio                                                      |   |           | 8.53    | %      |              |   | 8.22 | % |
| Tier 1 to Risk Weighted Assets                                      |   |           | 11.61   | %      |              |   | 11.30 | % |
| Total Capital to Risk Weighted Assets                               |   |           | 12.86   | %      |              |   | 12.55 | % |

----

Index

----

Index

| Liquidity Sources and Uses                                                                   |
|----------------------------------------------------------------------------------------------|
|                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                         |   | March 31, 2011 |   |   | December 31, 2010 |   |
| (In thousands)                                                                               |   | Total |   |   | In Use |   |   | Available |   |   | Total |   |   | In Use |   |   | Available |   |
| Sources:                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds borrowing lines of credit                                                      |   | $ | 58,529 |   |   | $ | - |   |   | $ | 58,529 |   |   | $ | 59,157 |   |   | $ | - |   |   | $ | 59,157 |   |
| Federal Home Loan Bank advances                                                              |   |   | 121,514 |   |   |   | 25,000 |   |   |   | 96,514 |   |   |   | 118,655 |   |   |   | 25,000 |   |   |   | 93,655 |   |
| Federal funds sold and interest-bearing deposits in other banks, excluding requirements |   |   |   |   |   |   |   |   |   |   | 27,101 |   |   | $ | 26,339 |   |   |   |   |   |   |   | 26,339 |   |
| Securities, available for sale and unpledged at fair value                              |   |   |   |   |   |   |   |   |   |   | 8,341 |   |   |   |   |   |   |   |   |   |   |   | 3,297 |   |
| Total short-term funding sources                                                             |   |   |   |   |   |   |   |   |   |   | 190,485 |   |   |   |   |   |   |   |   |   |   |   | 182,448 |   |
|                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Uses:                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unfunded loan commitments and lending lines of credit                                   |   |   |   |   |   |   |   |   |   |   | 64,060 |   |   |   |   |   |   |   |   |   |   |   | 66,215 |   |
| Letters of credit                                                                            |   |   |   |   |   |   |   |   |   |   | 4,464 |   |   |   |   |   |   |   |   |   |   |   | 4,412 |   |
| Total potential short-term funding uses                                                      |   |   |   |   |   |   |   |   |   | $ | 68,524 |   |   |   |   |   |   |   |   |   |   | $ | 70,627 |   |
|                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of short-term funding sources to potential short-term funding uses                     |   |   |   |   |   |   |   |   |   |   | 278.0 | % |   |   |   |   |   |   |   |   |   |   | 258.3 | % |

ITEM 3. QUANTITATIVE 

ITEM 4. CONTROLS 

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Index

PART II, OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

ITEM 2. UNREGISTERED 

ITEM 3. DEFAULTS UPON

ITEM 4. (REMOVED 

ITEM 5. OTHER 

ITEM 6. EXHIBITS

| Exhibit     |                                                                                                                                                 | Exhibit     |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
| Number           |                                                                                                                                                 | Description |
|             |                                                                                                                                                 |        |
| 3.1              | Articles of  Incorporation of Fauquier Bankshares, Inc., as amended, incorporated by reference to Exhibit 3.1 to Form 10-K filed March 15, 2010 |
|             |                                                                                                                                                 |        |
| 3.2              | By-laws of  Fauquier Bankshares, Inc., as amended and restated, incorporated by reference to Exhibit 3-2 to Form 10-Q filed August 9, 2010.     |
|             |                                                                                                                                                 |        |
| 31.1             | Certification of CEO pursuant to Rule 13a-14(a).                                                                                                     |
|             |                                                                                                                                                 |        |
| 31.2   | Certification of CFO pursuant to Rule 13a-14(a).                                                                                                     |
|             |                                                                                                                                                 |        |
| 32.1             | Certification of  CEO pursuant to 18 U.S.C. Section 1350.                                                                                       |
|             |                                                                                                                                                 |        |
| 32.2             | Certification of CFO pursuant to 18 U.S.C. Section 1350.                                                                                        |

----

Index

SIGNATURES

----